Please use this identifier to cite or link to this item: http://hdl.handle.net/10419/153650
Authors: 
Kalemli-Ozcan, Sebnem
Papaioannou, Elias
Peydró, José-Luis
Year of Publication: 
2010
Series/Report no.: 
ECB Working Paper 1216
Abstract: 
Although recent research shows that the euro has spurred cross-border financial integration, the exact mechanisms remain unknown. We investigate the underlying channels of the euro’s effect on financial integration using data on bilateral banking linkages among twenty industrial countries in the past thirty years. We also construct a dataset that records the timing of legislative-regulatory harmonization policies in financial services across the European Union. We find that the euro’s impact on financial integration is primarily driven by eliminating the currency risk. Legislative-regulatory convergence has also contributed to the spur of cross-border financial transactions. Trade in goods, while highly correlated with bilateral financial activities, does not play a key role in explaining the euro’s positive effect on financial integration.
Subjects: 
euro
European Union
financial integration
FSAP
law and finance
regulation
Trade
JEL: 
F1
F3
G2
K0
Document Type: 
Working Paper

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